Chapter 01 Business Basics

Chapter 01 - Business Basics

Chapter 01

Business Basics

Multiple Choice Questions

1.What occurs when businesses sell products or services for more than they cost to produce?
A.Expense
B.Profit
C.Loss
D.Revenue

2.What refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service?
A.Expense
B.Profit
C.Loss
D.Revenue

3.Which of the following is not a type of business?
A.Sole partnership
B.Partnership
C.Limited partnership
D.Corporation

4.Which form of business recommends a legal agreement between two or more business partners that outlines core business issues?
A.Sole proprietorship
B.Partnership
C.Corporation
D.LLC

5.What is the fundamental difference found in a limited partnership?
A.Only one partner is responsible for all of the partnership's losses
B.Both partners are responsible for all of the partnership's losses
C.Both partners are protected from being responsible for all of the partnership's losses
D.None of the above

6.Partnership agreements typically include all of the following, except:
A.Expectations for sharing profits and losses
B.Partner's salary requirements
C.Methods for conflict resolution
D.Shareholder's expectations for a successful business

7.What is a hybrid entity that has the legal protections of a corporation and the ability to be taxed (one time) as a partnership?
A.Limited partnership
B.Limited liability corporation
C.Limited proprietorship
D.Limited shareholder

8.What analyzes the transactional information of the business so the owners and investors can make sound economic decisions?
A.Accounting
B.Bookkeeping
C.Financial Accounting
D.Managerial Accounting

9.What involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities?
A.Accounting
B.Bookkeeping
C.Financial accounting
D.Managerial accounting

10.What involves analyzing business operations for internal decision making and does not have to follow any rules issued by standard-setting bodies such as GAAP?
A.Accounting
B.Bookkeeping
C.Financial accounting
D.Managerial accounting

11.What describes the basic transaction data such as its date, purpose, and amount and includes cash receipts, canceled checks, invoices, customer refunds, employee time sheet, etc?
A.Balance sheet
B.Source document
C.Transaction
D.Financial statement

12.Which of the following financial statements gives an accounting picture of property owned by a company and of claims against the property on a specific date?
A.Balance sheet
B.Statement of owner's equity
C.Statement of cash flows
D.Income statement

13.What reports operating results (revenues minus expenses) for a given time period ending at a specified date?
A.Balance sheet
B.Statement of owner's equity
C.Statement of cash flows
D.Income statement

14.What tracks and communicates changes in the shareholder's earnings?
A.Balance sheet
B.Statement of owner's equity
C.Statement of cash flows
D.Income statement

15.What is an asset?
A.A distribution of earnings to shareholders
B.Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C.Refer to the costs incurred in operating and maintaining a business
D.Anything owned that has value or earning power

16.What is a dividend?
A.A distribution of earnings to shareholders
B.Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C.Refer to the costs incurred in operating and maintaining a business
D.Anything owned that has value or earning power

17.What is revenue?
A.A distribution of earnings to shareholders
B.Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C.Refer to the costs incurred in operating and maintaining a business
D.Anything owned that has value or earning power

18.What is the function of the marketing department?
A.Deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities
B.Includes the policies, plans, and procedures for the effective management of employees
C.The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
D.The process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company's products

19.What is the function of the sales department?
A.Deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities
B.Includes the policies, plans, and procedures for the effective management of employees
C.The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
D.The process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company's products

20.What is the rate at which the net present value of an investment equals zero?
A.Internal rate of return (IRR)
B.Return on investment (ROI)
C.Cash flow analysis
D.Break-even analysis

21.What is a means to conduct a periodic check on the company's financial health?
A.Internal rate of return (IRR)
B.Return on investment (ROI)
C.Cash flow analysis
D.Break-even analysis

22.What is the point at which revenues equal costs?
A.Break-even point
B.Cash flow analysis
C.ROI
D.IRR

23.Which of the following is not accomplished by human resources management?
A.Employee recruitment
B.Employee training
C.Employee vacation scheduling
D.Employee appraisals

24.What is calculated by dividing the firm's sales by the total market sales for the entire industry?
A.Break-even point
B.IRR
C.Market share
D.Income statement

25.Which of the following is not a reason to increase market share?
A.Economies of scale
B.Reputation
C.Increased bargaining power
D.Nearing production capacity

26.Which of the following is not a part of the marketing mix?
A.Product
B.Price
C.Point
D.Promotion

27.What is the division of a market into similar groups of customers?
A.Market management
B.Market mix
C.Market communications
D.Market segmentation

28.Which of the following represents geographic segmentation?
A.Based on regional variables such as region, climate, population density, and population growth rate
B.Based on variables such as age, gender, ethnicity, education, occupation, income, and family status
C.Based on variables such as values, attitudes, and lifestyles
D.Based on variables such as usage rate, usage patterns, price sensitivity, and brand loyalty

29.Which of the following represents psychographic segmentation?
A.Based on regional variables such as region, climate, population density, and population growth rate
B.Based on variables such as age, gender, ethnicity, education, occupation, income, and family status
C.Based on variables such as values, attitudes, and lifestyles
D.Based on variables such as usage rate, usage patterns, price sensitivity, and brand loyalty

30.Which of the following is not one of the four phases in the product life cycle?
A.Growth
B.Decline
C.Place
D.Introduction

31.What is a standardized set of activities that accomplishes a specific task, such as processing a customer's order?
A.Transaction
B.Business process
C.Expense
D.Marketing

32.What is the analysis and redesign of workflow within and between enterprises?
A.Business process
B.Management information system
C.Transaction
D.Business process reengineering

33.What is operations management?
A.A field concerned with the use of technology in managing and processing information
B.The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
C.The function that plans for, develops, implements, and maintains IT hardware, software, and the portfolio of applications that people use to support the goals of an organization
D.The management of systems or processes that convert or transforms resources into goods and services

34.What is information technology?
A.A field concerned with the use of technology in managing and processing information
B.The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
C.The function that plans for, develops, implements, and maintains IT hardware, software, and the portfolio of applications that people use to support the goals of an organization
D.Includes the methods, tasks, and techniques organizations use to produce goods and services

35.What is management information systems?
A.A field concerned with the use of technology in managing and processing information
B.The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
C.A general name for the business function and academic discipline covering the application of people technologies, and procedures—collectively called information systems—to solve business problems
D.Includes the methods, tasks, and techniques organizations use to produce goods and services

True / False Questions

36.Human resources management includes the policies, plans, and procedures for the effective management of employees (‘human resources').
TrueFalse

37.Accounting deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities.
TrueFalse

38.Break-even analysis is the point at which revenues equal costs.
TrueFalse

39.For profit corporations primarily focus on making money and all profits and losses are shared by the business owners.
TrueFalse

40.A loss occurs when businesses sell products or services for less then they cost to produce.
TrueFalse

Fill in the Blank Questions

41.______are similar to sole proprietorships, except that this legal structure allows for more than one owner.
______

42.A limited ______is much like a general partnership except for one important fundamental difference; the law protects the limited partner from being responsible for all of the partnership's losses.
______

43.______is the actual recording of the business's transactions, without any analysis of the information.
______

44.______accounting involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities.
______

45.______represents the ability of the business to pay its bills and service its debt.
______

46.______are a distribution of earnings to shareholders.
______

47.The income statement reports a company's ______income, or the amount of money remaining after paying taxes.
______

48.______deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities.
______

49.______segmentation is based on variables such as usage rate, usage patterns, price sensitivity, and brand loyalty.
______

50.Operations management is the management of systems or processes that convert or transforms ______into goods and services.
______

Essay Questions

51.Define the three common business forms.

52.List and describe the seven departments commonly found in most organizations.

53.Describe a transaction and its importance to the accounting department.

54.Identify the four primary financial statements used by most organizations.

55.Define the relationship between sales and marketing, along with a brief discussion of the marketing mix.

56.Define business process reengineering and explain how an organization can use IT to transform its business.

Chapter 01 Business Basics Answer Key

Multiple Choice Questions

1.What occurs when businesses sell products or services for more than they cost to produce?
A.Expense
B.Profit
C.Loss
D.Revenue

This is the definition of profit.